Bi-Weekly Pay "To be Budgeted"
Hello! I hope someone can give me some tips and tricks about making YNAB work for you when you are paid bi-weekly. I've been using YNAB for about a year now and it has worked great - when I was paid once a month. I've now moved to a bi-weekly pay schedule and my "to be budgeted" is always in the red. I am making the same amount of money, the only item that has changed is the frequency.
When I was paid once a month, I would simply log in all of my expenses on the 30th of the previous month, pay everything on the 1st and the remaining would go to savings/debt. I never had a problem with anything being over budget.
Now I'm constantly in the red in the to be budgeted. Any advice on how to keep that from looking over budgeted? My biggest fear is that the numbers will not calculated correctly and I will not have a good view of my money.
I believe that you are finding that it is difficult to make the YNAB software work if you do not actually follow the YNAB method. The YNAB method is that you allocate the funds you have RIGHT NOW, not the funds you anticipate receiving. Also, that you make your spending decisions based on the available balance of your categories. Which means recording your expenses as you make them, not logging them all at the end of the month in one fell swoop. I do 100% manual entry of all my transactions. That's 3 minutes a day. Some people opt to link their accounts. The official methodology is to still do 100% manual entry and use the import as a back up/double check. Obviously many people who link their accounts neglect to do manual entry and thus are at risk of overspending their category balances due to the multiple day lag between incurring an expense and the software finally being able to import the cleared transaction.
So getting paid every other week - when you get your paycheck ask yourself, what does this money have to do before I get paid again? Fund those categories. If there is money left over, don't forget upcoming quarterly or annual expenses. Or setting aside money monthly to fund birthdays or holidays so that you aren't scrambling right before an event. Are you going to have to replace your roof in 5 years? Start saving for that (Yes I know that you've been using the software for a while, but since you haven't been following the method, I want to make sure this stuff is flagged).
If you are paid 26 times per year, there will be 2 months per year that you receive 3 paychecks. A way to smooth out your budgeting is to budget each month as if you will only ever receive 24 paychecks and then put the third paychecks in a Deferred Income category and slowly release funds from that category back to TBB (assuming the category held 2 paychecks of income, you would want to release 1/12 per month). Also ideally you would maybe set aside a little each month in a category to build an administrative buffer (this is not "extra money" or an emergency fund). Once this category held a full month's worth of paychecks (let's say this happens on August 22nd with your final August paycheck), you would release the funds back to TBB and hide the category because you won't need it any more. Then you would budget the entirety of September. After that, all paychecks received in September would fund October. You could budget the entire month all at once when the final September pay arrives. Then all October checks would fund November, etc and so on.
TLDR: TBB should NEVER be red. If it is, you need to remove funds from your categories until it is 0. YNAB is an envelope budgeting method. The way envelope budgeting works is that you have all your money in cash and you dump it on the kitchen table and start stuffing it in envelopes marked Rent, Groceries, Fun, Gas, Utilities, Summer Camp, 2020 Family Reunion, etc. And as you spend the money, you take it out of the appropriate envelope. When the Groceries envelope is empty, you have to take money out of some other envelope if you want to buy a loaf of bread. Here's the key - you can't fill an envelope with IOUs. When the pile of cash on the table is gone, you have to stop filling your envelopes, so if you get your money more than once a month, you have to fill your envelopes in multiple sessions unless you have enough money not already in an envelope to fill each envelope with a month's worth of funds.
Once your TBB is $0, you stop budgeting. For now you budget half of your month each time you get paid.
By budgeting only 2 paychecks each month, the 3 paycheck months will help you get ahead. Use the third paycheck to fund half of the next month. After a year you will be budgeted and can budget for the whole month at the beginning of each month as you were used to because paychecks received this month will fund next month....
YNAB has never been a great fit for people who get paid fortnightly, or for that matter if you have bills that get paid 2 or 3 monthly. You can certainly make it work (and I have, for about 5 ½ years), but you have to work around things a little with planning, goals etc.
My strategy for getting paid is to work my monthly budget off two fortnightly pays. Then the extra pay each 6 months or so is a bonus, and tops up savings categories that don't get so much love in regular months.
It's also important to go back to basic principles, and only budget the money you have - you simply can't apply a full month income to the month's expenses if what you actually receive is less than that.
YNAB works perfectly fine for people who get paid fortnightly. I know as I've been paid fortnightly my entire life and first bought YNAB in 2008. The only difference between getting paid fortnightly and monthly is how often you budget. Rather than once a month when paid monthly, you budget every two weeks.
Once you've saved up enough, what YNAB once called a buffer (approximately one month's pay), you can then budget an entire month at once. At that point you are no longer living paycheck to paycheck. As soon as my last paycheck of February arrives, I can budget the entire month of March.
The bottom line is that you only budget money you have.
Ashley Diane and Gold Mask I have always been paid every two weeks. To make matters worse, my paycheque fluctuates wildly. I work shift-work with over time, stand by, and on call plus my regular hours. A cheque with 5 regular shifts on it is going to be significantly different than one with 7 shifts and 4 hours of OT and 3 call backs. I manage budgeting with YNAB quite easily following what jenmas and others have said. Budget until the big green number at the top equals 0. My "trick" is how I label my categories.
Say I'm getting paid on the 4th and the 18th this month.
My Budget categories would look something like this:
Bi-weekly & Monthly Obligations
Mortgage $600 bi-weekly 600
Groceries $200 bi-weekly 200
5 - Hydro $100 100
30 - Bank Fee $15 0
Auto Maintenance $70 70
Apr - Professional Association $500 30
Apr - Drivers License $90/5yrs 0
I know I'm going to need a roof over my head and food every paycheque so they are labelled bi-weekly, I put the exact amount of the mortgage in the name so that it's easy to remember how much to budget and I put a guess in for groceries to start I can adjust it up or down depending on the amount of my cheque. I get paid on the 4th so I know I need to fund my hydro bill before my paycheque on the 18th, but the bank fee can wait until the next paycheque if it has to. I put the day of the month these bills come out of my account in the name and order them accordingly in my category list so I can easily go down the list when I'm doling out the money. I also make use of the Scheduled Transactions feature so I can see what's coming out of the account before my next paycheque in the ledger.
For True Expenses I know that these are categories I want to carry over, I also know that it's variable, so I put a target value for the month in the title.
For the Yearly or longer term items I put the month that they are due in the title and the total for the year or 5 years. Then I set a goal "target value by date" for the month before the due date (just in case it's due on the 1st of the month). Why are things always due on your birthday?
Say my paycheque on the 14th is $1000, I go through and plunk in the numbers starting with the ones that are due the soonest ("What does this money have to do before I get more money?"). Then it's a matter of current priorities until I reach 0.
I get paid every other week also. What I've done that's been helpful to me is to set up both my fixed and variable expenses by the day of the month they are due. So my rent obligation due on the 1st of every month heads up the list. That way when I get my first paycheck of the month (or have leftover funds from the previous month, I budget for the things that need to be paid before I get my next paycheck. In each category I note the date the bill is due and the amount (if it is fixed). This makes it pretty easy to budget each month by just going down the list without having to look up dates or amounts.
I have notes in each category for recurring transactions about when they hit my bank account. I have goals set for the categories with automatic payments. (I have goals set for other things as well, but the automatic payments are much more mindless than the fact that I budget $X for groceries.) I am not yet a month ahead, so I budget things I need early in the month and worry about the rest of the month later.
I'm paid bi-weekly as well. One of the things that helped me immensely was to actually use a Group scheme like YNAB sets up on a new budget. When I first jumped into YNAB, the first thing I did was replace those "silly" Groups like "Immediate Spending" and "True Expenses" and instead added my own that were theme based like "Housing", "Transportation", "Food", etc. Problem is when it came time to fund my categories with a paycheck it was hard to tell what my money needed to do before the next paycheck. I didn't have a clear picture of priorities without jumping back and forth between my groups and categories.
Now I have Groups "Immediate Expenses", "Online Services", "True Expenses", "Savings Goals" and "Just for Fun" in that order and the order is key. Many of the categories in the first two groups are bills that are on autopay so I put the date they usually come due or are autopayed and "AP" if they are autopayed in the category name. Then when I get a paycheck I start at the top, taking care of my most important Immediate Expenses that will come due before my next bi-weekly paycheck (that's where the visible dates come in). For things like Groceries or Gas for the car I split my monthly budget between each paycheck. For example, we spend $800 Groceries/mo which means I take $400 from each paycheck.
Once the immediate expenses are covered I drop down to the Online Services. I added this category because I have a number of them and they're all autopay. So I make sure I cover the ones that are coming due before my next paycheck. These aren't all important and I could live without, but as long as I'm subscribed to them, they're automatically drawing money out of my account so I better make sure they're covered.
Then we drop down to True Expenses. Some of these will only get funded if I had to draw them down this month, like Auto Repairs. Others will get a little each month like the Christmas Fund. These are key to eliminating the surprises or what I call "budget busters".
Finally we drop down to the Savings Goals and Just for Fun. These are last because if needed I don't really need to fund these. If I had an irregular income I might run out of money with the current paycheck before I had a chance to fund some of these.
So basically, organizing the Groups in this way helps me prioritize the things that must be funded first and then I move on to the groups and categories of lesser and lesser importance.